In part one of this column I described how borrowers of student loans get into trouble and how collection agencies, on behalf of the federal government often make their lives miserable. But just how do the debt collectors go about it?

According to an excellent article by Andrew Martin (“Debt Collectors Cashing in on Student Loan Roundup”) in the September 9, 2012 New York Times, they often start with trolling the Internet for databases that contain information on respective debtors. When they find a suspect, they contact their prey. If a debtor refuses to cooperate, is employed, the agency will try to garnishee their wages. And the government is tenacious. It usually gives a collection agency just six months before transferring the case to another agency.

The article tells the story of Arthur Chaskin of Michigan, who borrowed $3,500 in the 1970s. By last January the debt, along with interest and penalties, had grown to 19 grand. When a government-contracted lawyer tracked him down, he garnisheed Chaskin’s brokerage account. A judge reduced the debt to $8,200, 25 percent of which went to the lawyer. The object lesson here is that student loan defaulters never know who is looking for them, when the hunters will strike, and how deep in doo-doo the debtors may find themselves. And, as a reminder, repayment may even come in the form of deductions from Social Security payments – not a pleasant prospect for those on fixed incomes.

Martin reports, “Government officials estimate that they still collect 76-82 cents on every dollar of loans made in fiscal 2013 that end up in default. That does not include collection costs that are billed to the borrowers and paid to the collection agencies.” A 2007 MIT study, however, estimates that Uncle Sam collects something closer to 50 percent of debt. The bad news for student debtors – but good news for taxpayers – is that the government, year to year, is growing ever more efficient at getting its money back – an 18 percent one-year improvement last fiscal year, totaling $12 billion.

Many defaulters are in dire straits. They received schooling and then got caught in the quagmire known as the Great Recession, unable to find work. Some are ill. Some are in over their heads with all types of accumulated debt. But with little chance of shedding their government debt through bankruptcy, they find themselves between a rock and hard place.

And even in cases where a person is broke and either ill, disabled, or unemployed, it’s not easy to incentivize collection agencies to help those debtors get into a program that either allows gradual payment – say through gradual income-based repayment – or to forebear on collecting until the debtors are back on their feet. That’s because the collectors make more money by collecting than by merely preventing default.

The creditors and debt collectors frequently don’t tell the borrowers about programs to ease the repayment burden, or the requirements for qualifying are so daunting that they give up in frustration.

Even President Obama acknowledged, “Too few borrowers are aware of the options available to them to help manage their student loan debt,” in a June memo.

Good news for borrowers may be on the horizon. Congress and the Department of Education are considering regulations that would require debt collectors to offer student loan delinquents an affordable income repayment plan. And the department has promised to do a better job of publicizing such plans, starting with those who are still in school. As part of the proposals, monthly payments would be limited to 10 percent of discretionary income.

But, according to Andrew Martin, “Efforts to change the incentive [reimbursement] structure for guarantee agencies have stalled. And the Obama administration’s efforts to impose new regulations on profit-making colleges were initially watered down and then significantly weakened by a federal judge.”

So while some folks are so deeply in debt that foreclosure and/or bankruptcy are the only ways out from under crushing debt, it will be almost impossible for them to shake off their student loan obligations.

Unless Congress (you know, the government branch with a 9 percent voter approval rating), gets head out of it’s a_ _ _ _ _ e, many of those students who made some big mistakes a long time ago will suffer for a long time to come. Congratulations to those collection agencies that care more about money than humaneness.

Millions of Americans are up to their wallets in debt for money they borrowed way back when and thought they’d get around to paying off . . . well . . . eventually. Good luck with that.

Almost 6 million people are at least a year behind in paying off their student loans for post-secondary education. And with new-graduate unemployment as high as it is, the prospects are getting worse. A September 9, 2012 article in the New York Times paints a pretty bleak picture. Sixteen percent of all those with outstanding balances—representing a whopping $76 billion—are in default. So what’s the upshot?

Many of the defaulters are being hunted down, not by the FBI or the local sheriff, but by collection agencies. This is ironic because in my last blog post I discussed the need to regulate collection agencies. Who should regulate them? The federal government (as well as the states). Who is hiring them? The federal government. So while the Consumer Financial Protection Bureau (CFPB) is taking steps to protect debtors from unsavory collection practices, the U.S. Department of Education (DOE) is hiring some of those same agencies the CFPB is trying to get in line. In the last fiscal year, the DOE paid $1.4 billion to collection agencies and other “bounty hunters” in order to recoup its losses.

Many years ago, there was a TV commercial for Chiffon margarine that ended with the catch phrase, “It’s not nice to fool Mother Nature.” Learning she had been fooled into thinking Chiffon was butter, Mom would summon up a thunderbolt. Substitute the U.S. government for Mother Nature and collection agencies for the thunderbolt, and you get a picture of what defaulters are up against. Unlike pitiful little banks and lame mortgage lenders, the fed can muster up some pretty loud thunderbolts of its own. The Times article tells the story of 29-year-old single mother Amanda Cordeiro of Florida, who is in the red on a student loan to the tune of 55 grand. She has had two tax refunds seized (private companies can’t do that) and has changed her phone number several times in the last year to avoid the harassing phone calls the CFPB is trying to put a stop to.

Other defaulters have had Social Security payments garnisheed. This makes life miserable for a lot of former students, especially those who have taken pricey courses at private for-profit schools, like University of Phoenix, ITT Technical Institute, Kaplan University and DeVry University. Many of these schools specialize in Internet coursework with disappointing completion rates for students and less-than-stellar job placement records. The educational institutes frequently coach students into taking out the loans, which are paid directly to the schools. Often, those who fail to find well-paying employment take it on the lam because they have no way to pay back the loans. Students who attended profit-making schools –about 11 percent of all students – account for nearly half of all defaults. Dropouts were nearly four times as likely to default as those who graduate.

While there are programs available to help desperate students pay off their loans over an extended period, with outstanding balance forgiveness at the end of that term, the companies that administer the loans for the government frequently fail to inform the borrowers of those programs. Mounting penalties and accumulating interest rates can lead to huge debt and ruined credit ratings, making life even more difficult when defaulters tries to take out a loan on a car or home, or when they apply for credit cards.

It is very difficult to wipe out government loans through bankruptcy, and they have no statute of limitations. The government has been able to recoup a whopping 80 percent of defaulted debt, about four times the rate of nongovernment lenders.

You may know the acronym ARM as standing for “adjustable rate mortgage.” ARM can also mean “accounts receivable management,” as debt collectors call themselves. The ARM industry is booming thanks to defaulted student loans. ARM companies seek government contracts because of their high rate of return.

When borrowers are delinquent paying for a year, the lender (Uncle Sam) declares them in default. If it cannot find the debtors, the government sics collection agencies on them.

I leave you and those you care about with a checklist:

Be very, very careful about taking courses from Internet post-secondary schools (see my column of July 17, 2012);

Don’t take out a student loan unless you are damned sure you are going to finish your course of study;

If you do apply for a student loan, get all the information up front about programs to help students who are having trouble paying off their loans;

If you are already delinquent, go to the agency through whom you acquired the loan and ask for the information on extended payback programs;

And finally, if you are in debt up to your neck, don’t go making babies, or you’ll be asking for a heap of grief.

On May 5, 2011 and June 20 of this year, I wrote about the new Consumer Financial Protection Bureau (CFPB). The anti-big-government contingent in Congress hated the idea of a big bully regulatory agency picking on poor, put-upon, and pitiable financial institutions. Never mind that the new bureau was designed to protect consumers from the types of abuses that contributed to the Great Recession.

Congressional Republicans let it be known that the driving force behind the formation of the CFPB, Elizabeth Warren, would never be approved as bureau director. So Warren decided to turn the tables. While President Obama nominated Richard Cordray to be the CFPB’s director, Warren threw in her hat to run against Republican Senator Scott Brown in Massachusetts.

CFPB Director Richard Cordray

Cordray has been showing that he’s no softy either. The former Ohio attorney general announced on Wednesday that debt collection agencies will come under the scrutiny of the bureau in cases that involve the collection of overdue student loan payments.

According to Edward Wyatt in The New York Times, the U.S. Department of Education holds more than $850 billion in outstanding student loan debt. “Millions of consumers are affected by debt collection, and we want to make sure they are treated fairly,” said Cordray. “We want all companies to realize that the better business choice is to follow the law — not break it.”

You may be familiar with the Dodd-Frank Act (actually, very few folks are all that familiar with it) that attempts to restrain the excesses of the finance industry. Under that legislation, the federal government has the authority to oversee nonbank financial companies.

The CFPB will scrutinize the debt collectors to ensure that they properly identify themselves and accurately disclose the amount of debt owed. The companies must provide a process to resolve any disputes—as well as communicate with consumers–“civilly and honestly.”

The Federal Trade Commission (FTC) received more than 180,000 complaints against debt collection companies in 2011. The CFPB’s new rules cover approximately 175 companies that each have annual receipts of at least $10 million. These companies account for almost two-thirds of the $12-billion-plus in annual debt collections of all types.

According to the Times story, a spokesperson for Consumers Union said, “There has been an explosion of shady debt collection tactics in recent years.” She went on to say “Businesses have a right to collect what they are owed but not to harass consumers for debt that has been already paid off or doesn’t belong to them.”

For years, state and local government consumer protection agencies have targeted debt collection agencies. They have accused collectors of abusive practices like harassing them with repeated telephone calls or misleading them by threatening to have them imprisoned for failure to pay debts, which is a nonexistent penalty.

What troubles me is that the while the big boys will come under scrutiny and face penalties, what about those companies that fall under the purview of the law but are too small to rattle the CFPB’s cage? I fear this policy will unintentionally give small offenders the impression that they are getting a free pass.

In any case, if you are in debt and feel you are being harassed or threatened by a collection agency, contact your state attorney general’s office. If the debt is about a student loan, contact the FTC or CFPB(Web site is your best bet). But don’t assume that lets you off the hook if you are in arrears. If you fail to deal with your predicament, you could end up in civil court as the defendant in a lawsuit.

In addition, the CFPB is now accepting complaints about credit reporting agencies, including :

Incorrect information on a credit report

A consumer reporting agency’s investigation techniques

Improper use of a credit report

Being unable to get a copy of a credit score or file, and

Problems with credit monitoring or identify protection services.

——————-

Here is a roster of categories that the Consumer Financial Protection Bureau is now covering. If you have a complaint concerning any of these financial areas, go to the CFPB Web site and click the appropriate icon:

I’m going to step out of my The Consumer Guy persona to discuss a few topics that are near and dear to me. For almost 20 years in a previous life, I was a standup comic and actor. That career actually led me to one in television consumer reporting.

During my comedy career, I twice crossed paths with Phyllis Diller. Once, I appeared in disguise on the iconic “game” show, The Gong Show, as the Bandit Impressionist. Ms. Diller was one of the three judges. She, along with the other judges, gave me the maximum score of 10 points each and I was that show’s winner, walking away with $516.32 and a trophy (which sits on my bookcase even today).

Some years later I ran into her at LAX. I introduced myself. We spoke for a brief moment. She was affable and very real, as opposed to her wacky comedy persona.

I tell you this because I want it understood that I have no axe to grind with Diller. I really liked her.

But . . .

When I hear in TV reports that she was a “pioneer” in women’s standup comedy, or as Joan Rivers said, Diller “broke the way for every woman comedian,” I feel that I must correct the record.

Have you ever heard of Minnie Pearl? Or Judy Canova? Moms Mabley? Betty Walker? Or Jean Carroll? They are among the handful who really were the “standup” trailblazers for women, including Phyllis Diller. And they started in the 1940s.

Minnie Pearl – photo – wikipedia

Canova was a major radio star and film actress in the 40s. You can still listen to episodes of her show.

Minnie Pearl, a character portrayed by Sarah Colley, with her trademark straw hat sporting a price tag hanging on a string, was a Grand Ole Opry fixture for decades starting in 1940. She became a regular on TV’s Hee Haw in 1969. There are more Minnie Pearl videos on YouTube than fleas on a stray hound dog.

Moms Mabley

Moms Mabley became a star with general audiences not too long before her death in 1975. She had spent most of her career in vaudeville and the so-called chitlin’ circuit, a loose collection of venues for black audiences that sprang up as a result of racial discrimination in the first half of the 20th century. Moms’ bawdy humor found a wider audience as television shows became less restrictive.

One of my favorite female comedy “pioneers” was Jean Carroll. She was a regular on the Ed Sullivan Show. Carroll was one of the few women on the “borscht belt” circuit – the Jewish hotels in the Catskill and Pocono Mountains near New York City. She had a fast-paced delivery with impeccable timing. I think of her as a precursor to the Joan Rivers style of standup. She even had her own TV show in 1953-54.

Jean Carroll. photo – whosdatedwho.com

Jean died last year at the age of 98.

I mention all of these women not to degrade Phyllis Diller, who stands tall in her own right, but to pay deserved homage to the ladies mentioned above and their many lesser-known contemporaries and those who preceded them.

Check out these women, and while you’re at it, take a peek at Fanny Bryce, Gracie Allen, Totie Fields, and any other old-timers you can find.

In 1991 the late journalist Jeff Zaslow interviewed me for his column in the Chicago Sun-Times about how advertisers sometimes use poor taste – or even hypocritical pitches – in order to hawk their wares.

Allow me to quote from Zaslow’s column: “Consumer advocate Ellis Levinson . . . finds all liquor ads objectionable and says our society is hypocritical. ‘During the World Series, you see baseball players [in public service ads] telling kids to say no to drugs. Then in the next commercial, ballplayers pitch beer. Beer gets you stoned. It’s a drug commercial.’”

Have things changed? You bet. Have you ever heard of Avion Tequila? I never had, until tonight. I was watching the Yankees-Rangers game when a commercial came on for the Mexican elixir (replete with a subtle reference to S & M pain).

What, exactly, are they selling?

I have also seen ads for Captain Morgan Rum and Skyy (please, spare me the clever spelling; Toys R Us is bad enough with its backward R) Vodka on professional sports broadcasts. Coors Beer promises you not only a silver bullet high-speed train electrifying your life, but lots of sexy women wearing not much in the way of sartorial splendor (i.e., they’re scantily clad).

I don’t know how else to say this, but I am pissed off. There was a day when beer and wine were the only alcohol products that advertised on TV. No more. I truly believe that if our graft-ridden Congress were not beholden to the booze industry, alcohol advertising on television would go the way of the dodo and cigarette ads. It’s already bad enough that kids can’t wait to get to college so they can board the Coors Silver Bullet.

Let’s just hope that Phillip Morris doesn’t gain enough traction among members of the House of Reprehensibles to entice its members to allow smokes back onto our home screens. In the meantime, if you have kids, lock your liquor cabinet.

In this post I’m kicking back (what the hell, it’s August and the livin’ is easy). Here are a few tips to make life a little simpler for you.

Cramming

No, this isn’t about what you do the night before an exam. It occurs when your phone bill, either home or mobile, lists charges for features you never requested; for instance call waiting or ringtones, respectively. On a landline bill the extra charges might even be itemized as “miscellaneous” or “enhanced” services.

If you don’t examine your bill you might end up paying for charges that an outside provider added to your bill.

According to the National Consumer League you should also avoid all 900 numbers they typically hit your bill by way of anonymous collect calls or signing up for online contests via your cell phone.

Free phone calls without a phone

I must confess I have not used this service myself because I hate electronics in general (look up the word “Luddite”). But here’s the lowdown. www.bobsled.com offers free calls from most web browsers, the iPad, iTouch, iPhone (ay, ay, ay!) and Android phones. Bobsled lets you call any landline or mobile phone in the United States (including Puerto Rico) and Canada. The receiving device does not need to have the Bobsled program.

Changing doctors and health insurance

According to Money magazine, you need to be extra cautious when changing physicians in order to be sure that your health insurance coverage stays in effect. It seems that insurers’ directories are often out of date. So if you switch from an in-network doc to one who is no longer part of the network, it could make you sick in the head.

This is especially true when it comes to emergency physicians and anesthesiologists, who rarely accept insurance.

If possible, find out in advance what your insurer will pay. Some insurers will only pay the current Medicare rates for out-of-network care. Some have reduced their coverage from 80 percent to 70 percent.

If you are checking into a hospital and you still have your wits about you, request in writing to be seen only by in-network providers. If you go out of network, call the hospital’s billing office and request a lower fee (unless taking the time means you will die or lose a leg, for example). Money advises that you try to negotiate a one-third deduction.

We recently learned that student debt in the United States has surpassed $1 trillion. What is a trillion anyway? Well, if you don’t know, it’s the same as a million people each owing a million dollars; or a billion people each owing a thousand bucks. In short, the people who owe this enormous sum are folks who attended an institution of “higher learning” (more on the quotes in a moment) and are now stuck with the bill.

How did this happen? In my other blog – which I co-author with the Consumer Gal (Cheryl Levinosn) we have discussed one major reason in our posts as well as in our book Enough of Us. If parents have kids and hope that their kids will one day go to college, they have to start planning for that eventuality. It makes our blood boil when parents of modest means don’t scrimp and save from the moment they become aware of the pregnancy. No smart phones, cable TV, or expensive gadgets. Forget the plans for upscale vacations or cars for the teens. That money belongs to the college-bound.

We live in the Bay Area; San Jose, to be exact. While the state is in terrible financial condition, it’s still a great place to live (ah, the weather!) But many educators, experts, and general Golden State residents worry about the future of California’s two great state university systems.

The education powers-that-be, including the governor and state legislature, are working desperately on higher education problems. The Cal Grant program helps low- and middle-income students pay for college. The state has formulated performance standards by which schools are eligible to receive funds that have been borrowed by students only if a quarter of students they graduate are able to pay off their loans in a reasonable amount of time. This standard is an indicator that the schools are graduating young adults with usable skills that lead to jobs.

Unfortunately, not all so-called institutions of higher learning are what they purport to be. There is a spate of schools that promise advanced education and good jobs in fields where openings go begging. They advertise heavily on the Internet and TV. The problem is that they frequently draw their potential students from families that can’t afford to pay the tuition. Those students usually have to borrow from a variety of government sponsored sources. According to California Assemblymember Bob Wieckowski, about 90 percent of these schools’ funding come from Stafford Loans, Pell Grants, G.I. Bill Grants, and the state’s Cal Grants.

University of Phoenix Spokane Campus

California Assemblymember Bob Wieckowski

The companies that run these schools netted $3.5 billion in 2009 and paid executive salaries of $41 million. Wall Street ain’t the only place where the governments get played for suckers. So while the execs rake in the bucks, most of the students gain few useful skills, have trouble – if any luck at all – finding relevant jobs, and are now burdened with heavy debt. As Wieckowski puts it, “We can’t continue to shovel taxpayer money into shareholder pockets, instead of adequately preparing students for their careers.”

When Assemblyman Wieckowski introduced legislation this year requiring the schools to meet more stringent criteria in order to receive state grants, the schools stepped up their lobbying efforts and managed to kill the bill in committee. The legislature never even got to vote on it. However, a coalition of reformers was able to make reforms in the budget process by cutting grants for high-priced schools, raised graduation-rate requirements, “and cracked down on schools with high loan default rates.”

In the meantime, both California State University and University of California systems, as well as the state’s community colleges, need more bucks. Perhaps with the reforms, there will be more state and federal financial benefits available.

This brings us back to the opening dilemma. Why aren’t parents providing for their kids’ higher education? If it’s because they can’t afford the costs, how can they afford the kids? This raises questions like:

Did they have more children than they could provide for?

Did they overspend on indulgences while the kids were growing up?

Would it be more realistic for their kids to attend junior colleges and after graduating look for higher education opportunities?

Should the kids work part time to help foot the bill while attending school?

And finally, when people who can afford to pay their share of taxes get significant tax deduction and a free K-12 scholarship for each kid, are we encouraging a system that is forever going to have trouble funding higher education. We go into this in some detail in Enough of Us. We need to consider whether or not we can afford to lower taxes for those families that will be asking the most help funding their children’s higher education.

I recently conducted an inventory in my house . . . in the dark. Well, almost dark. Just before going to sleep I went from room to room counting the number of lights that were on. Nightlights, digital clocks, power indicators on electronics, and even an indicator on our emergency standby plug-in flashlight.

Our microwave oven, toaster oven and gas range each showed me the time . . . within a three-foot span! In all, there were more than 50 lights on in the house. It’s nuts!

Almost one third of all electricity use in California homes is attributable to electronic devices, especially home entertainment equipment and computers. The rest goes to refrigerators, heaters, air conditioners, lighting, stoves, laundry appliances, pools and the like.

All this electricity use contributes to higher fuel prices, air pollution, the outflow of cash to foreign nations and dependence on not-so-nice countries for fuel. To the rescue (I’m being optimistic here) comes the California Energy Commission. Never heard of it? Neither have most Californians.

As appliances become more energy efficient, in step all the gadgets, gizmos and whatnots to take up the slack. And heading them off at the pass, the commission is about to ask the electronics industry to think efficiently. So what’s the problem? Well, it has a name: the Consumer Electronics Association (CEA). Does it have clout? Let me answer listing some of its members: Apple, HP, Intel; you get the idea. And the CEA is behind a bill introduced by California Assemblymember Charles Calderon that would curtail the commission’s authority.

Sony PlayStation 3 equipment bundle

On the other side of the argument is PG&E, Northern California’s mega-utility, which likes the idea of energy efficiency. The CEA, however, makes the case that convergence, where multiple functions are merged into one device as with smart phones, saves on electricity. By allowing users to avoid employing several different devices to run a variety of functions, they are more efficient than, say, using a cell phone, a computer, and a digital camera, each of which has to be charged or plugged in.

The state claims that updated efficiency standards would save state residents $7 billion per year, reducing the need for additional power plants and lowering water use by 70 billion gallons. When it comes to water, California is very insecure; so insecure, in fact that if it were a person, no team of psychiatrists could help.

California is famous (infamous?) for its leadership in environmental regulation. If the state requires greater efficiencies for a variety of gadgets, it’s likely that either manufacturers will sell those more-efficient items nationwide for the sake of financial efficiency, or that other states will adopt similar requirements. “These standards will ensure that new products sold in California contain the latest and smartest technology so that our products sip rather than gulp energy,” said Noah Horowitz of the Natural Resources Defense Council, quoted in the San Jose Mercury News.

Because the California Energy Commission has not yet defined what a computer is (you read that right), it is not clear whether so-called tablet devices will be included in the new requirements. But several popular implements will be facing efficiency upgrades, including gaming devices like Wii, PlayStation and Xbox, as well as monitors and subscription TV service set-top boxes.

So what does this mean for you? It’s time for all of us to do our part. Where it’s practical, can’t we live with one fewer nightlight, unplugged cell phone rechargers, and audio systems plugged into power strips that we turn off when not in use? And if you live in a house, how many plugged-in lights do you have shining outside overnight? In an age when so many folks are worried about the national debt we’ll be leaving for our progeny, maybe we should all be thinking about how much of a messed-up environment they’ll be living in.

You have probably heard about the Dodd-Frank Act. It aims to regulate speculative and unfair practices on the parts of financial institutions. Most Congressional Republicans are out to kill it. Many Democrats want it strengthened. Part of that act is the creation of the Consumer Financial Protection Bureau (CFPB). How silly! Complaints against lenders? Why on earth would we big, bullying consumers need protection from those sweet little-bitty banks like JP Morgan Chase, Bank of America and Citibank?

When financial consumer advocate and Harvard Law Professor Elizabeth Warren advocated before Congress for the creation of the CFPB she was raked over the coals by the free market boys (and girls?). It soon became clear that if and when the bureau was created, she had a Klondike Bar’s chance in a microwave of being approved for the post of director. That position eventually went to Richard Cordray, the former attorney general of Ohio, a well-known consumer protection guy. President Barack Obama had to appoint Cordray with a recess appointment to avoid the free-market contingent in the House. Warren went back to Massachusetts to run for the U.S. Senate.

It looks like Cordray is taking this job seriously. The CFPB made a formal announcement today that it has set up a web site that allows

Richard Cordray

consumers to post grievances against companies that provide credit cards, mortgages and student loans. The grievances are posted in the form of databases.

Since the bureau opened for business last July, it has received 45,000 grievances – 17,000 about credit cards alone – through June 1, 2012.

“By making our data publicly available, initially in the area of credit cards, we hope to improve the transparency and efficiency of this essential consumer market,” Cordray said in a statement. ‘‘Each and every time we hear from American consumers about their troublesome transactions with financial products, it gives us important insight.”

The public database includes complaints made since June1. Working with the credit card issuers, the CFPB created a number of response categories that show how each complaint has been dealt with and how quickly.

For each category, companies can respond to a consumer in one of four ways. Once the complaint is routed to a company, it has 15 days to respond and 60 days to resolve the complaint. Consumers should expect to receive a refund, an explanation, a correction, a change in account terms, or simply have the case closed.